TheStreet Deals With SEC on Accounting Fraud

(CN) – TheStreet.com, a financial news website created by television personality Jim Cramer, and three of its executives have settled claims of filing false financial reports. In three federal complaints filed Tuesday, the Securities and Exchange Commission took aim at TheStreet Inc., ex-CFO Eric Ashman, and two former co-presidents of a onetime unit of the company, Gregg Alwine and David Barnett. Cramer, who hosts “Mad Money” on CNBC, is not a party to any of the actions in Washington, D.C. Though the SEC did not identify the division that Alwine and Barnett led, TheStreet has reportedly confirmed that the allegations refer to Promotions.com. Regulators say that an audit revealed that TheStreet had filed false financial reports in 2008. Those reports had claimed revenue from fraudulent transactions at Promotions.com. Promotions.com also reported artificially inflated revenues and misstated operating income to investors. Cramer, still sits on TheStreet’s board and is reportedly the firm’s fourth-largest shareholder. Cramer reported in 2010 that the SEC was investigating the accounting at its former Promotions.com unit. TheStreet acquired the online promotional agency for $20.7 million in August 2007 and sold it to a company owned by Promotions.com managers for $3.1 million in December 2009, according to a company filing. Promotions.com reportedly specializes in online promotions such as sweepstakes. According to the SEC’s statement: “After the acquisition, TheStreet failed to implement a system of internal controls at the subsidiary, which enabled the accounting fraud.” Simultaneous to the SEC’s filing of charges, the three executives and TheStreet settled the claims without admitting or denying the allegations. Barnett and Alwine have agreed to pay penalties of $130,000 and $120,000, respectively. Ashman agreed to pay a $125,000 penalty while also reimbursing TheStreet more than $34,000 under the clawback provision. Ashman will also be barred from acting as a director or officer of a public company for three years. Barnett and Alwine will be barred from serving as officers or directors of a public company for 10 years.